Leaders of the Portland Clean Energy Fund are planning to change their grant review process after withdrawing a $12 million grant due to financial fraud risks.

The climate action group granted the funds to a local nonprofit, Diversifying Energy, as part of a new Heat Response Program. The grant was intended to pay for the distribution of electric heat pump systems to offer energy-efficient cooling systems to low-income households and communities of color.

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But last month, The Oregonian reported that the grantee’s executive director, Linda Woodley, had previously served time in prison for defrauding energy companies and had amassed millions of dollars in liens for unpaid federal and state taxes.

On Wednesday, Portland City Council voted to withdraw the nearly $12 million grant from Diversify Energy and offer a similar $10 million grant to another applicant, Earth Advantage.

“There is no shame in making a mistake,” City Commissioner Jo Ann Hardesty said after voting to redirect the grant funds. “The good news is that it was caught before any public dollars went out the door.”

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Hardesty, who calls the Portland Clean Energy Fund program her baby, thanked the organization’s leaders for their swift action to fix a potentially devastating problem.

On Wednesday night, members of the Portland Clean Energy Fund grant committee discussed new procedures for its grant application evaluation process that would add additional checks and balances to reduce the risk of fraud.

“I think we’re going to have to be approaching this with a level of humility because we might not have all the answers today,” grant committee member Ranfis Villatoro said.

Committee members say they are considering an additional review of grant applications if an organization’s track record is limited or unrelated to the proposed project. They may also ask for additional reference checks or limit grant sizes.

Portland Clean Energy Fund was created by a voter-approved ballot measure in 2018 and has been celebrated as a first-of-its-kind environmental justice program created and led by communities of color. It’s managed by the City of Portland.

In a statement, Portland City Commissioner Carmen Rubio said it’s important to continue the program’s goal of delivering cooling units to vulnerable Portlanders. More than 100 Oregonians died of heat-related stress last summer, and Multnomah County identified a lack of air conditioning as a prime factor in dozens of those deaths. Rubio proposed directing grant funds to another organization after withdrawing them from Diversifying Energy.

“Saving lives depends on the successful execution of this heat-response grant,” she said. “I want to preserve public trust in this new, innovative program, so that it can continue funding climate action in frontline communities – work that will save more lives and build a more resilient city.”

The Portland Clean Energy Fund grant committee will meet again on Jan. 19 with plans to develop new grant evaluation processes by Jan. 21.

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